sentimenTrader Blog


2018-06-18 | Jason Goepfert

This is an abridged version of our Daily Report.

Gold bugs’ ruined weekend

Heading into the weekend, gold futures suffered their largest loss in over a year, to a multi-month low. When it happened it May, the selling marked an exhaustion and gold worked higher. Most times it did something similar, rallying over the next month but not beyond.

Big boys are driving the gains

A handful of very large stocks have been driving gains in the S&P 500 and Nasdaq 100 over the past year. The capitalization-weighted S&P and NDX are outperforming their equal-weighted twins.

Prior times the cap-weighted indexes did so well for so long, the trend reversed, but not right away.

The latest Commitments of Traders report was released, covering positions through Tuesday

The 3-Year Min/Max Screen shows that “smart money” hedgers are the most heavily short copper in years…ever, actually. If you Choose A Secondary Indicator and view hedgers’ positions as a % of open interest, they’re holding about 25% of contracts net short.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-15 | Jason Goepfert

This is an abridged version of our Daily Report.

Emerging disappointment

Economic surprises in emerging markets have been consistently, and increasingly, negative.

That has led to mostly poor returns in emerging market stocks and currencies. It has been better for emerging market bonds (in dollars), with positive total returns most times.

Traders are leaving

One positive sign for the stocks is that ETF traders are leaving funds like EEM, which suffered a $750 million exodus on Wednesday alone.

Nasdaq’s June high

The Nasdaq Composite scored another new high as we head into mid-June. Prior highs around this time led to some short-term weakness, primarily into the end of the month. After that, there wasn’t much to chew on for the “worst six months” crowd in tech.

Bond options

While bond funds like TLT pull back, options traders in 10-year Treasury futures have been buying calls to an extreme degree. The 10-day average of the 10-Year Put/Call Ratio is down to one of its lowest levels in years.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-14 | Jason Goepfert

This is an abridged version of our Daily Report.

Short squeeze

The most shorted stocks in the market have outperformed the S&P by a wide amount in recent weeks. An index of heavily shorted stocks has jumped nearly 10% to a new high.

After similar short squeezes, the S&P outperformed heavily shorted stocks going forward.

Optimistic momentum

Heading into Wednesday, short-term optimism had been extreme for 8 out of the last 10 days. That’s a sign of buying momentum that isn’t seen very often. After other times it triggered, stocks struggled in the very short-term but not after that.

Fed prediction

Using markets’ knee-jerk reaction following a Federal Reserve meeting as a predictor for future returns is a questionable strategy. Since the 2009 low, the S&P 500’s reaction on a FOMC day predicted the next day’s return 58% of the time. 



For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-13 | Jason Goepfert

This is an abridged version of our Daily Report.

Bond market battle

The spread on high-yield bonds has sunk to a multi-year low, while investment-grades are at a year high. That is exceptionally unusual, as corporate spreads typically move more or less together.

It seems like it should be a good sign, but the few prior instances led to a stumble in stocks.

Small business boom

The latest survey of small business shows record optimism, especially as a time to expand. The highest levels of optimism have led to mixed returns that favor small-cap Value over Growth. Micro-cap stocks also struggled, with negative returns over the next 1-2 years.

Optimistic momentum

We haven’t seen too many signs of momentum during the rally off the April low in stocks. Just a few here and there. One that’s starting to show is the Short-Term Optimism Index has been above 70 for 8 of the last 10 days, which hasn’t happened since last October.

Long-term pessimism

If you go to the Dashboard and click the Optix Heatmap under the Sentiment Indicator Summaries section, you can click the “50 Days” button, for example, and it will show most- and least-loved assets over the past 50 days.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-12 | Jason Goepfert

This is an abridged version of our Daily Report.

Options traders go all in

Options traders have rushed into bullish strategies at the expense of more conservative ones. Total call volume last week mushroomed to 32 million contracts, the highest since late January, while put volume was about average.

Much of that was small traders buying call options to open, not a good sign for stocks.

TIPS seeing some love

Investors are rushing into TIPS funds that protect against a rise in inflation. Previous spikes in assets led to inconsistent returns in the funds, making it hard to read into this.

Intraday give-up

Ahead of major news events this week, investors didn’t seem to intent on making big bets either way. The S&P 500 fund, SPY, open and closed in the bottom 25% of its intraday range, even while hitting a multi-week high intraday. That has happened 22 other times in its history.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-11 | Jason Goepfert

This is an abridged version of our Daily Report.

Euro Death Cross

For more than a year, the euro’s 50-day average has been above its 200-day average.

That trend has now ended, after one of the longest streaks in the currency’s history. The end to other long streaks led to further weakness in the euro and gold, while the dollar did well (see inside).

Down days have more oomph

So far in 2018, the average down day has been 20% larger than the average up day.

That’s among the worst ratios since 1928. It has been an inconsistent warning sign, though stocks did struggle through August (see inside).

Staples stabilize

Consumer Staples finally rallied above the 50-day average after hitting a multi-year low. That has led to an excellent risk/reward in the sector over the long-term (see inside).

The latest Commitments of Traders report was released, covering positions through Tuesday

“Smart money” hedgers continued to add to their decade-long high exposure to the Swiss franc. Same with hogs, where they are below a record long position by just a hair.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-08 | Jason Goepfert

This is an abridged version of our Daily Report.

ETF investors stay home

Flows into domestic ETFs have swamped that of overseas funds over the past 4 weeks.

The other times it happened to this degree, world stocks started to outperform the S&P.

Mom & pop ignore safety

Individual investors are showing one of the widest differences in allocations to stocks vs safe investments. The spread between the two has been seen twice before. Both times, there was a long-term rotation out of stocks and into bond.

Cubes got engulfed

The Nasdaq 100 fund, QQQ, hit a high then put in a bearish engulfing pattern. That has led to some very short-term weakness, not so much after that.

Exposed

According to the NAAIM organization, the average active investment manager is now 90% net long stocks, and even the most bearish manager is long (usually there’s at least one short seller). Since the 2006 inception of the survey, there have been 22 other weeks when this was the case.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-07 | Jason Goepfert

This is an abridged version of our Daily Report.

Momentum is picking up

Momentum in breadth figures is returning, with the McClellan Summation Index climbing. When it reaches 500 for the first time in months, it has led to an excellent risk/reward skew for stocks.

The S&P 500’s annualized return when the Summation Index was above 500 has been impressive.

Value trapped

The Russell 1000 Growth Index reached a 52-week high on Wednesday, while Value is nearly 7% below. That’s the most Value was down since 2010. Previous signals led to continued outperformance in Growth, though its lead plateaued.

Builders getting bid

Homebuilders have been one of the few industries that has struggled to hold above its 50-day average. For the first time in 4 months, one of its longest streaks ever, the industry has moved into a medium-term uptrend.

VIX smash

The VIX “fear gauge” closed below 12 for the first time in months. The 11 other times it first closed below that level in at least three months, the S&P 500’s worst performance going forward was over the next 6 sessions, when it saw a gain 4 times and an average return of -0.4%.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-06 | Jason Goepfert

This is an abridged version of our Daily Report.

ETF investors are loving bond funds

Bond funds have dominated the ETF inflow list lately, especially short-term government Treasury funds. The Technology sector is the only one that has seen large, and consistent inflows among sectors.

Broad commodity funds have attracted a lot of attention, which didn’t work out too well last time.

Companies say “just trust us."

Investors are buying a record amount of loans without the usual protections through the first half of the year. Loans issued without standard investor protections are making up nearly 1/3 of all leveraged loans. Discretionary companies are getting the most trust, while Staples are being shunned the most in 7 years.

Options enthusiasm

Options traders bought (or sold) more than two calls for every put on Tuesday, pushing the Equity Put/Call Ratio below 0.5 for one of the few times in recent years. According to the Backtest Engine, over the past five years a reading below 0.5 has led to a gain in the S&P 500 over the next week 46% of the time (17 out of 37 attempts).

Short-term extremes

The Short-Term Optimism Index has averaged 70% for the past week, one of the higher readings in recent years. According to the Backtest Engine, that has led to flat returns over the past five years over the next couple of weeks.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


2018-06-05 | Jason Goepfert

This is an abridged version of our Daily Report.

Some tech stocks struggle to keep up

The S&P 500 Technology index has hit new highs the past two days, but fewer of its stocks are coming along. In January and March, more than 40% of its members hit 52-week highs, compared to only 15% on Friday.

This was an inconsistent warning sign, however, even as it’s considered a major negative divergence.

A good day (and sign) for the Nasdaq

The Nasdaq Composite scored a fresh 52-week high for the first time in months. The end of its streak of more than 50 days since its last high triggered in early summer, which isn’t typical. When the index sets a new high in early- to mid-summer, its risk during the summer is lessened.

Middle East heat

Among country ETFs, nothing is hotter than Saudi Arabia (haha). Its Optimism Index is now above 90, making it the reddest of the red on the Geo-Map. We only have a couple years of history for the fund, but optimism has been above 90 on 26 other days.

Not sweet on sugar

Sugar contracts have tumbled the last two days, losing nearly 7% just since Thursday. That’s the 2nd-largest two-day selloff in five years. It’s fairly common for the volatile commodity, however, with more than 200 such selloffs since the 1980s.


For access to the full report, indicators, charts, screens, and Backtest Engine, log in or sign up for a free 30-day trial today.


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